PLEA 


INCOKPOEATION 


CO-OPERATIVE  LOAN 


AND 


BUILDING  ASSOCIATIONS 


'.".■■i,':,-:  ..‘  w>  >■>?'-: 

«r 


UNIVERSITY  OF  ILLINOIS 

LIBRARY 

Class 

Book  Volume 

Mrl0-20M 

V W)  ; ■ 


A PLEA 


FOE  THE  INCOEPOEATION 


OF 


CO-OPERATIVE  LOAN' 


AND 


BUILDING  ASSOCIATIONS. 


SUBMITTED  TO  THE 


■j;  Soint  .Special  ILabor  Committee  of  tlje  iWassact)U5etts  Eegislatuve, 

JOSIAII  QUINCY. 

\ 


BOSTON : 

WRIGHT  & POTTER,  STATE  PRINTERS, 
79  Miek  Street  (corner  of  Federal). 

1875. 


4 


act  of  hoarding  and  accumulating  in  a mechanical  sort  of  way ; gains 
no  knowledge  that  would  enable  him  to  manage  for  himself  a large  sum 
of  money;  and,  therefore,  by  keeping  him  in  ignorance  of  the  various 
means  of  investment  and  accumulation,  chains  him  to  a life  of  mere 
dependence  on  the  skill  and  knowledge  of  others  in  the  management  of 
his  accumulated  savings. 

This  system,  therefore,  while  doing  much  positive  good,  does  not  act 
in  unison  with  the  spirit  of  the  present  age  to  the  fullest  extent ; for 
while  it  teaches  the  working  classes  to  save,  it  goes  no  farther.  Its 
protege  may,  in  the  course  of  time,  accumulate  a considerable  sum ; but 
he  knows  not  where  to  place  it  outside  of  the  savings  bank.  He  pos- 
sesses no  knowledge  or  experience,  no  confidence  in  his  own  judgment 
or  that  of  others,  and  even  fails  of  confidence  in  the  saving  fund  itself 
at  times,  and  adds  his  weight  to  a panic-stricken  rush  for  his  savings  at 
a time  most  unpropitious  to  both  saving  fund  and  depositor.  How 
many  instances  are  there  on  record  of  ‘ runs  ’ on  the  saving  funds  of 
large  cities,  the  result  of  an  ignorant,  senseless  panic  on  the  part  of 
depositors  ? 

The  system  regulating  ^Building  Associations  in  the  State  of  Pennsyl- 
vania has  a tendency  directly  opposite  to  this  system. 

• 1st.  In  that  it  is  perfectly  democratic,  admitting  each  individual  cor- 
porator or  member  to  a full,  free  and  unrestricted  voice  in  the  creation 
and  management  of  associations  formed  under  it,  and  a constant  over- 
sight of  its  operations  and  affairs. 

2d.  In  that  it  is  entirely  mutual  and  equal  in  distributing  its  benefits, 
giving  to  all  its  members  their  equal  portion  of  all  its  profits  and  gains. 

3d.  In  that  it  is  much  more  liberal  in  its  return  of  profits  and  gains 
than  any  other  known  plan  of  saving  and  accumulating  from  small  sums 
of  money.  Having — owing  to  its  entirely  mutual  character — no  pre- 
ferred Class  to  share  its  profits,  no  heavy  sinking-fund  to  create  and 
hold  in  reserve  against  contingencies  hardly  within  the  bounds  of  possi- 
bility, and  no  necessity  for  expensive  banking-houses  and  clerk  hire  ; and 

4th.  In  that  it  is  the  only  plan  by  which  the  working  man  can  become 
his  own  capitalist,  and  create  a source  of  wealth  from  which  he  can 
supply  all  reasonable  demands,  without  the  aid  or  interference  of  the 
outside  capitalist.  In  short  that  it  is  a system  ‘ of  the  people,  by  the 
people,  and  for  the  people.’  One  that,  with  ordinary  judgment,  enter- 
prise, and  strict  integrity  brought  to  bear  in  its  management,  cannot 
fail  of  permanent  benefit  and  profitable  results  to  any  community  or 
body  of  people  adopting  it,  and  faithfully  carrying  out  its  principles.” 

I have  thus  introduced  to  your  notice  a plan  that  is  novel  in 
Massachusetts,  but  which  has  been  productive  of  great  good  to 


5 


the  working  men  of  other  States.  In  the  appendix  to  a little 
pamphlet  entitled  “ Moderate  Houses  for  Moderate  Means,”  I 
mentioned  the  existence  of  a Building  Association,  managed  by 
E.  M.  Davis,  Esq.,  in  the  neighborhood  of  Philadelphia.  Shortly 
afterward  I received  a letter  from  Edmund  Wrigley,  Esq.,  of 
that  city,  of  which  the  following  is  an  extract : “ I do  not  know 
whether  you  are  aware  that  there  are  over  five  hundred  such  asso- 
ciations in  this  city,  with  an  aggregate  invested  capital  of  from 
forty  to  fifty  millions,  and  which  is  increasing  at  the  rate  of  a 
million  of  dollars  a month  from  monthly  payments,  and  that  new 
associations  are  constantly  forming.  We  have  reduced  the  sys- 
tem, as  it  applies  to  saving  money,  to  a very  fine  point.”  The 
sums  mentioned  were  so  large  that  I thought  there  must  be  an 
error  in  the  amounts.  In  reply,  however,  to  my  inquiry,  Mr. 
Wrigley  says  : “ The  figures  I liave  sent  you  are  not  set  down  at 
random.  I have  the  names  of*  the"  associations,  and  a large  mass 
of  annual  reports  to  verify  my  figures  ; and,  if  you  would  visit  our 
city,  I would  show  you  what  an  immense  field  we  have  in  small 
houses,  varying  from  four  up  to  ten  and  twelve  rooms,  on  lots  from 
12x40  to  20x100  and  50x200  in  rural  neighborhoods,  that  were 
purchased  with  these  monthly  deposits  and  held  as  security  for  the 
forty  or  fifty  millions  loans  I mentioned  in  my  last  letter.  This 
form  of  association  extends  all  through  our  State,  and  nearly 
every  village  in  New  Jersey  has  one  or  more  of  them.  They 
prevail  very  largely  throughout  the  Southern  and  Western 
States,  are  quite  numerous  in  Minnesota,  Kansas,  and  Nebraska, 
and  the  Territories.  I state  this  from  positive  knowledge,  having 
been  for  several  years  in  direct  communication  with  most  of  them, 
and  in  almost  daily  receipt  of  their  several  reports  and  annual 
statements  during  my  editorship  of  the  ‘ Building  Associations’ 
Journal.’ 

I believe  the  present  great  success  of  our  associations  is  the 
result, — 

1.  Of  a comparatively  small  limit  of  shares  in  each  association. 

2.  The  restriction  of  all  investments  to  real  estate  or  the  stock 
of  the  particular  association. 

3.  A restriction  against  receiving  deposits  except  by  way  of 
instalments  on  stock. 


By  these  means  simplicity,  security,  and  moderation  are 
attained,  and  the  dangers  of  unwieldliness  and  complication,  as 
well  as  the  sudden  and  unexpected  accumulation  of  large  and 
unmanageable  balances,  or  the  equally  sudden  demands  for  the 
same  are  avoided.  Everything  is  as  fixed,  certain,  and  automatic 
as  a machine.  Thus  it  is  that  our  working  men,  with  only 
working-men’s  experience,  manage  these  associations  so  success- 
fully. Long  departure  from  these  principles  would  result  in  the 
downfall  of  the  system,  as  the  past  in  New  York,  New  England, 
and  this  city  abundantly  proves.” 

I add  another  letter  from  F.  M.  Wood,  Esq.,  who,  it  will  be  seen, 
has  had  a great  experience  in  such  associations  : — 

Bespected  F^dend  : I observe,  through  the  public  press,  that  you 
have  generously  offered  to  assist  in  the  organization  of  Building  Asso- 
ciations in  your  State  and  city.  I take  the  liberty  of  writing  to  you, — 
my  excuse  being  that,  my  having  been  for  the  last  twenty-five  years 
identified  with  them  in  this  city  I feel  a deep  Interest  in  their  promulga- 
tion. Therefore,  I wish  you  Godspeed  in  the  good  work ; for  they 
are  the  means  of  lifting  the  poor  up  to  comfortable  circumstances,  and 
often  to  a large  competency.  They  encourage  thrift,  industry,  habits 
of  economy  and  saving.  In  short,  they  help  mankind  to  help  them- 
selves ; they  make  better  citizens;  they  produce  a revenue  to  the  city 
or  State  by  the  comfortable  dwelling-houses  they  erect ; they  produce 
a sale  of  land,  make  work  for  the  mechanics  of  all  kinds,  build  up  the 
population,  make  a good  police  force, — because  a man  owning  his  own 
house  deprecates  mobs  and  riots,  that  he  knows  will  increase  taxation. 
In  short,  it  has  made  Philadelphia  what  it  is — a city  of  homes. 

T have  been  a member  for  twenty-five  years  ; am  a member  of  twelve 
different  associations.  1 send  enclosed  the  report  of  one  that  is  twenty- 
two  years  old.  We  organized  in  1852  with  seventy-five  shares;  that  is, 
we  received  $75  a month.  That  series  closed  out  in  nine  years  and  six 
months.  The  second  series  in  eight  years  and  six  months.  The  third 
series  in  seven  years  and  six  months  ; that  is,  the  shares  became  worth 
.$200  by  paying  in  one  dollar  a month  during  that  time.  At  the  present 
time  we  take  in  .$5,000  a month  in  this  association.  This  association 
has  a capital  of  over  .$320,000  at  the  present  time.  We  have  now  nine 
associations  running,  and  in  the  whole  nine  we  take  over  $30,000  a 
month.  Quite  a jump,  from  $75  monthly  to  .$30,000  monthly.  Yet 
this,  fabulous  as  it  may  appear,  is  the  honest  truth,  as  our  books  show. 
We  have  a regular  office,  employ  two  clerks  besides  myself,  I oversee- 
ing all  as  secretary  and  manager,  under  the  control  of  a Board  of  six- 


7 


teen  directors,  who  meet  twice  every  month  in  the  evening.  This 
Board  consists  of  active  merchants  and  mechanics,  and  retired  men  of 
wealth,  some  of  whom  visit  the  office  every  day.” 

To  encourage  the  formation  of  such  associations,  charters  are 
granted  on  the  application  of  ten  persons  to  the  Court  of  Common 
Pleas.  These  charters  are  perpetual,  with  the  right  to  issue  5,000 
shares  of  $200  each.  Women  have  the  right  to  hold  shares  in 
their  own  names,  with  power  to  transfer,  sell,  etc.,  independent  of 
their  husbands,  and  the  associations  are  exempt  from  taxation 
and  from  the  State  law  against  usury. 

After  such  facts  and  statements  it  is  useless  to  make  an  argu- 
ment in  favor  of  institutions  that  have  exerted  such  beneficial 
effects  on  working  men  and  working  women  in  other  States.  All 
that  is  necessary  is  to  explain,  in  some  degree,  the  mode  of  their 
organization  and  the  reasons  for  it,  and  here  I have  the  advan- 
tage of  using  the  experience  of  others.  Mr.  Edmund  Wrigley, 
of  Philadelphia,  has  published  two  small  volumes,  the  one  en- 
titled, “ The  Working-man’s  Way  to  Wealth  ; a practical  treatise 
^ on  Building  Associations,  what  they  are  and  how  to  use  them.’ 
The  other,  “ How  to  Manage  Building  Associations  ; a directors’ 
guide  aud  surveyors’  assistant,  with  forms  for  keeping  the  books 
and  accounts,  together  with  rules,  examples,  aud  explanations 
illustrating  the  various  plans  of  working.”  * 

Mr.  Wrigley,  through  a philanthropic  desire  to  extend  the 
benefits  of  such  associations  to  the  working  men  and  women  of 
Massachusetts,  has  not  only  permitted  me  to  make  large  extracts 
from  his  book,  but  has  drafted  such  a bill  as  his  experience 
suggests,  which  I now  submit  for  such  alterations  and  modifica- 
tions as  the  wisdom  of  the  legislature  may  think  best. 

The  experience  of  working-men’s  trains  on  the  Eastern  Rail- 
road, where  passengers  are  carried,  morning  and  evening,  a dis- 
tance not  exceeding  nine  miles  for  five  cents,  has  proved,  as  by 
the  railroad  commissioner’s  report,  a financial  success.  This  will 
induce  other  roads  (as  they  are  required  by  law)  to  do  the  same. 
If,  in  addition  to  this,  workingmen  can,  by  co-operation,  without 
resort  to  capitalists,  procure  the  means  to  erect  their  houses,  it 


* These  can  be  obtained  at  the  store  of  A.  Williams  & Co.,  135  Washington  Street. 


8 


.'-T 


will  take  them  out  of  our  crowded  alleys  and  give  them  the  in- 
dependence of  their  own  homes. 

The  rest  of  this  argument  will  be  taken  from  the  books  of  Mr. 
Wrigley. 

By  the  laws  of  Pennsylvania,  the  Court  of  Common  Pleas  is 
authorized,  on  the  application  of  ten  or  more  persons,  to  issue 
permanent  charters,  giving  associations  the  privilege  of  issuing 
their  stock  in  successive  series  : — 

The  total  issue  of  stock  is  confined  or  limited  to  5,000  shares,  but  in 
place  of  disposing  of  the  whole  in  one  issue,  all  at  one  date,  an  asso- 
ciation on  starting,  will  sell  or  dispose  of  as  many  shares  as  is  thought 
advisable  (say  500)  during  the  first  year,  and  these  will  run  their  course 
to  the  final  result ; and  at  the  end  of  the  first  year  the  sum  total  of 
dues  and  profits  is  divided  by  the  total  number  of  shares  in  this  first 
“series,”  and  their  value  is  thus  ascertained,  whereupon  a new  or 
second  “series”  of  stock  is  issued,  of  as  many  shares  as  is  thought 
advisable  to  sell,  and  payments  on  this  second  series  commence 
only  with  their  issue  ; and  these  in  turn  run  the  same  as  the  first  series, 
and  at  the  end  of  the  second  year  the  sum  total  of  dues  and  profits  for 
that  year  are  divided  by  the  total  number  of  shares  in  both  series,  and 
their  value  again  ascertained.  The  stock  in  the  first  series  will  be 
found  to  have  a value  of  two  years’  dues  ($24  per  share),  to  which  is 
added  the  profit  made,  during  the  two  years,  on  each  share  ; while  the 
stock  in  the  second  series  will  be  worth  but  the  amount  of  one  year’s 
dues  ($12  per  share),  and  the  one  year’s  profits  ; and  so  on,  each  year 
producing  a new  series  of  stock,  the  sum  total  formed  by  dues  and 
profits  being  divided  at  the  end  of  each  year  by  the  total  number  of 
shares  of  all  the  series  then  issued  (excepting  of  course,  such  stock  as 
may  have  been  withdrawn  and  returned  to  the  association) . 

By  the  time  the  eighth,  ninth,  or  tenth  series  is  issued,  accordingly 
as  the  association  has  been  more  or  less  successful  in  accumulating 
profits,  the  first  series  will  have  reached  its  ultimate  value,  and  the 
stockholders  in  that  series  will  receive  $200  per  share  in  cash,  if  they 
have  not  borrowed,  and  those  who  have  borrowed  receive  their  mort- 
gages receipted  in  full.  So  that  from  the  first  to  the  eighth  or  tenth 
year,  as  the  case  may  be,  the  permanent  association  issues  a new  series 
of  stock  every  year,  and  after  the  eighth  or  tenth  year  a series  is  can- 
celled each  year  on  reaching  its  ultimate  value,  and  a new  series  is  issued 
to  fill  its  place,  to  be  cancelled  again,  in  turn,  eight  or  ten  years  later.  The 
process  might  be  likened  to  a rod  long  enough  to  hold  ten  rings,  on 
which  a ring  is  placed,  representing  the  first  series.  At  the  end  of  the 


9 


first  year,  another  ring,  representing  the  second  series,  is  placed  on 
behind  the  first,  which  is  slipped  along  to  make  room  for  the  second. 
At  the  end  of  the  second  year,  a third  ring  is  placed  on  the  rod ; at  the 
end  of  the  third  year,  a fourth  ring:  and  so  on  for  ten  years.  At  the 
end  of  the  tenth  year,  the  eleventh  ring  is  put  on,  which  pushes  the  first 
ring  (or  series)  off  tlie  farther  end  of  the  rod,  it  being  capable  of  hold- 
ing but  ten  rings  ; and  every  subsequent  year  a ring  is  put  on  at  one 
end,  and  pushed  off  at  the  other  end,  representing  the  newest  or  last 
series  at  one  end,  and  the  oldest  or  f ully  worked  out  series  at  the  other 
end,  and  the  intermediate  rings  those  series  gradually  approaching  the 
ultimate  value. 

In  the  meantime,  the  law  gives  the  power  and  right  to  associations 
to  issue  new  stock  in  the  place  of  that  cancelled  by  having  reached 
its  ultimate  value  of  $200  per  share,  or  such  as  may  have  been 
cancelled  and  returned  by  members  who  have  withdrawn  before  the 
final  result  is  reached ; provided  that  the  total  number  of  shares,  of  all 
series,  shall  not  exceed  2,500  at  any  one  time.  Thus  all  cancelled  shares 
fall  back  again  into  the  association,  to  be  replaced  by  new  issues  of  stock. 

It  will  be  seen  that  in  the  principle  the  association  is  permanent,  and 
it  is  only  the  membership}  that  terminates  with  the  series  of  stock  on 
which  that  membership  is  claimed. 

This  serial  issue  of  stock  may  be  monthly,  quarterly,  half-yearly,  or 
yearly,  as  desired ; and  the  oftener  they  are  issued,  of  course  the 
more  readily  a new  member  can  enter,  as  he  will  have  no  back  dues  to 
pay  at  all  where  the  series  is  issued  monthly,  and  but  one  year’s  back 
dues  at  most  if  the  series  is  issued  yearly.  Thus,  the  door  is  always 
held  open  for  new  members  to  enter  and  keep  up  the  competition  for 
loans  ; there  is  always  a demand  for  the  money,  the  premiums  bid  av- 
erage a higher  rate,  and  the  different  series  reach  their  ultimate  value 
in  a shorter  period  of  time  than  in  the  terminating  plan. 

Neither  is  there  the  same  trouble  in  paying  off  a series  that  is 
worked  out,  where  the  issuing  of  series  is  not  placed  at  periods  too  far 
apart,  but  say  monthly,  quarterly,  or  half-yearly : for  the  amount  of 
money  required  to  cash  any  one  series  is  very  small  in  proportion  to 
the  par  value  of  the  entire  capital  stock ; and  the  payments  that  are 
made  in  a lump  by  the  terminating  association,  are  thus  scattered  in  small 
amounts  throughout  the  entire  existence  of  the  permanent  association 
after  its  first  series  becomes  due. 

The  Time  for  Running  Out,  or  Winding  Up. 

The  period  of  time  consumed  by  any  one  series  of  stock  in  reaching 
its  ultimate  value  of  $200  per  share,  is  regulated  by  the  amount  ot 
profits,  made  each  year. 


2 


10 


If  no  profit  whatever  was  realized  and  the  dues  were  paid  monthly, 
without  lending  them  out  to  borrowers,  of  course  it  would  take  two 
hundred  months,  or  sixteen  years  and  eight  months  to  make  up  two 
hundred  dollars.  But  this  would  do  no  one  any  good  beyond  the  mere 
act  of  hoarding. 

On  th*e  other  hand,  an  association  making  an  average  annual  profit 
of  six  dollars  and  forty-six  and  two-thirteenths  cents  per  share,  will 
close  in  ten  years  and  ten  months,  as  near  as  may  be,  viz : — 

EXAMPLE  NO.  1. 

10  years’  and  10  months’  dues,  at  $1  per  month,  . . . $130 

10  “ “ 10  “ profits,  at  $6.46  2^^,  ...  70 

Ultimate  value  of  each  share, $200 

Which  is  equal  to  10  per  cent,  per  annum  on  the  amount  of  cash 
invested  for  the  average  time  of  its  investment. 

An  association  making  an  average  annual  profit  of  $8  on  each  share, 
will  close  out  in  ten  years  exactly,  as  was  previously  stated,  viz  : — 

EXAMPLE  NO.  2. 


10  years’  dues,  at  $12  per  year, $120 

10  years’  profits,  at  $8  per  year, 80 

Ultimate  value  per  share,  in  10  years $200 


Which  is  equal  to  13|^  per  cent,  per  annum  on  the  cash  paid  for  the 
averaged  time. 

Thirteen  dollars  annual  profit  >vill  close  out  in  eight  years,  viz : 


EXAMPLE  NO.  3. 

8 years’  dues,  at  $12  per  year, $ 96 

8 years’  averaged  profits,  at  $13, 104 

Ultimate  value  of  each  share, $200 


Which  is  equal  to  27  per  cent,  per  annum,  on  the  cash  paid,  for 
the  averaged  time  each  dollar  was  invested. 

Thus,  $200  will  be  realized  under  the  Building  Association,  or 
Mutual  Plan,  in  from  eight  to  eleven  years,  on  sums  of  money  paid  or 
saved,  one  dollar  at  a time  month  after  month ; while,  if  the  whole 
sum  of  $130  (being  the  total  sum  paid  on  each  share  to  a Building 
Association  running  out  in  ten  years  and  ten  months)  was  deposited  in 
an  ordinary  savings  fund,  all  in  one  amount,  in  place  of  in  easy  monthly 
payments,  it  would  take  eleven  years,  at  four  per  cent,  interest  to 
reach  $200. 


11 


Building  Associations. 

Building  associations  may  properly  be  called  the  “Mutual  or  Co- 
operative System  of  Saving  and  Borrowing  Money.” 

A Building  Association  is  composed  entirely  of  one  class  of  stock- 
holders, and  its  assets  or  property  is  represented  by  stock.  Its  original 
capital  is  derived  from  the  munthly  instalments  or  dues  paid  on  account 
of  each  share  of  stock  by  the  holder  thereof,  and  the  chief  sources  of 
profit  on  the  investment  in  this  stock,  by  means  of  which  the  association 
is  enabled  to  work  out  the  ultimate  value  of  $200  per  share,  in  a given 
number  of  years,  is  obtained  from  loaning  the  accumulated  monthly 
instalments  of  dues  and  profits  to  such  of  the  stockholders  only  as  may 
under  the  rules  borrow  the  same. 

These  chief  sources  of  profit  consist  of  two  items  r — 1st,  The  premium 
deducted  from  the  loan  on  taking  it ; and  2d,  the  interest  upon  the 
loan,  which  is  paid  monthly  during  its  continuance.  There  are  also 
two  minor  sources  of  profit,  to  wit:  3d,  Fines  charged  upon  dues  and 
interest,  when  in  arrears  ; and,  4th,  The  profit  on  withdrawals  of  stock 
before  the  ultimate  result  is  reached. 

These  four  items  of  profit  which  are  largely  increased  by  the  mo7ithly  i 
compounding  of  interest  upon  them,  as  well  as  upon  the  monthly  dues  ; 
are  added  together  at  the  end  of  each  year  on  settlement  of  the  books ; 
and,  after  deducting  the  year’s  expenses,  the  total  l)alance  remaining  is 
divided  by  the  number  of  sliares  in  the  hands  of  stockholders.  This 
shows  what  the  profit  on  each  share  has  been  for  the  year  just  closed  ; 
and  this,  added  again  to  the  dues  paid  in,  and  the  profit  made  during 
previous  years,  shows  the  actual  value  of  each  share  of  stock  at  the  close 
of  any  given  year ; and  this  process  is  repeated  at  the  close  of  each 
year,  until  the  accumulated  dues  and  profits  will  divide  to  every  share 
the  sum  of  $200. 

The  property  or  assets  with  which  the  association  liquidates  or  pays 
to  each  shareholder  $200  for  each  share  he  holds,  is  composed  of  two 
items, — First,  the  bonds  and  mortgages  given  by  borrowers ; and  sec- 
ond, cash  in  hand  at  the  time  the  final  result  is  reached.  The  bonds 
and  mortgages  are  handed  to  the  borrowers,  receipted  in  full,  and  the 
stockholder  who  has  not  borrowed  is  paid  in  cash,  $200  for  each  share 
of  stock  he  owns. 

This  is  a general  explanation  of  the  plan  and  its  results.  It  is  pro- 
posed, in  the  following  pages,  to  give  a more  minute  and  detailed  rep- 
resentation of  the  system,  and  to  follow  it  step  by  step,  pausing  to 
examine  each  separate  part,  that  the  process  by  which  the  final  result  is 
attained  may  fully  appear  to  view  on  a little  study  and  examination. 


12 


.STOCKHOLDERS. 

Many  persons  join  Building  Associations  with  a view  of  continuing 
their  payments  until  their  stock  shall  have  reached  the  ultimate  value  of 
•iB200 ; while  others  join  with  the  especial  view  of  borrowing.  For  the 
purposes  of  explanation,  we  will  divide  these  into  two  classes. 

1st.  The  non-borrowing  class,  formed  of  those  members  who  do 
not  avail  themselves  of  the  privilege  of  borrowing  in  advance  the  ulti- 
mate value  of  their  shares,  but  continue  paying  their  monthly  dues 
until  within  from  eight  to  eleven  years,  they  are  entitled  to  $200  per 
share,  and 

2d.  The  borrowing  class,  composed  of  those  members  who  avail 
themselves  from  time  to  time  of  this  privilege,  and  thus  anticipate  the 
ultimate  value  of  their  stock,  paying  a premium  for  the  present  use  of 
it,  as  welLas  the  one  dollar  per  share  interest,  in  addition  to  the  regular 
monthly  dues  (as  explained  in  the  former  chapter),  until  the  ultimate, 
result  is  reached  and  the  loan  is  paid  and  cancelled  by  the  value  of  the 
stock. 

By  referring  to  the  rule  given  in  the  previous  chapter  for  the  division 
of  profit,  it  will  be  recollected  that  these  two  classes  share  mutually  in 
this  respect.  They  differ,  however,  in  this,  that  while  they  both  pay 
their  monthly  dues,  the  borrower  in  addition  to  this,  pays  a premium 
for  his  loan  and  one  dollar  extra  (or  in  other  words  six  per  cent,  inter- 
est upon  it)  besides,  and  thus  furnishes  the  chief  sources  of  prfiot, 
that  enables  the  association  in  a greater  or  less  time  to  reach  the  ultimate 
result  of  $200  per  share. 

Leaving  the  consideration  of  the  advantages  to  be  derived  from 
borrowing  under  this  plan  let  us  consider  those  belonging  to 

The  Non-Borrowing  Member 

First,  with  regard  to  whom  somewhat  remains  to  be  said.  Those  who 
have  no  present  use  for  a large  sum  of  money  and  are  able  to  lay  by 
say  from  $1  to  $15  per  month,  by  paying  it  inonthl}'-  for  a period  of 
from  eight  to  eleven  years,  realize  on  each  share  $200,  and  on  fifteen 
shares  $.3,000. 

Withdrawals  of  Stock. 

There  is  one  thing  further  to  be  noticed  under  the  head  of  Non-bor- 
rowing Stockholder,  and  that  is  the  right  to  withdraw  or  cancel  his 
stock  at  any  time,  by  giving  thirty  days  notice  to  the  Board  of  Direc- 


13 


tors  of  his  desire  to  do  so.  “ When  he  or  she  shall  be  entitled  to  receive 
the  amount  paid  in  by  him  or  her,  and  such  portion  of  the  profits  as  the 
by-laws  may  determine,  less  all  fines  and  other  charges.  Provided  that 
at  no  time  shall  more  than  one-half  of  the  funds  in  the  treasury  be 
applicable  to  the  demands  of  withdrawing  stockholders,  without  the 
consent  of  the  Board  of  Directors,  and  that  no  stockholder  shall  be 
entitled  to  withdraw  whose  stock  is  held  in  pledge  for  security.  Upon 
the  death  of  a stockholder,  his  or  her  legal  representatives  shall  be 
entitled  to  receive  the  full  amount  paid  by  him  or  her,  and  legal  inte^rest 
thereon,  first  deducting  all  charges  that  may  be  due  on  the  stock.  No 
fines  shall  be  charged  upon  a deceased  member’s  account  from  and  after 
his  or  her  decease,  unless  the  legal  representative  of  such  decedent 
assume  the  future  payment  of  the  stock. 

It  is  a popular  error,  that  persons  who  join  Building  Associations 
must  when  once  they  begin,  keep  on  paying  in  until  the  end,  or  forfeit 
and  lose  all  the  money  paid.  By  the  foregoing  extract  from  the  law  it 
will  be  seen  that  this  is  not  the  case,  but  that  those  who  are  unable  or 
unwilling  to  continue,  are  allowed  to  retire  from  the  association,  receiv- 
ing all  their  money  back  (less  any  fine  they  may  have  incurred  by  neg- 
lect to  pay  their  monthly  dues  promptly),  with  a fair  portion  of  the 
profits. 

This  right  to  withdraw  is  a very  proper  and  necessary  feature  in  this 
system,  and  it  becomes  more  apparent  when  we  consider  the  class  of 
persons  intended  to  be  benefited  by  it,  and  their  liability  from  sickness 
or  loss  of  employment  suddenly  to  be  placed  without  the  means  of  sup- 
port. Instead  of  being  compelled  to  seek  a market  for  their  stock  and 
sell  it  perhaps  at  a great  sacrifice  or  hypothecate  it  to  some  devouring 
money-lender  at  a high  rate  of  interest,  they  are  allowed  to  return  their 
stock  to  the  association,  the  stock  is  cancelled  and  they  receive  the 
money  they  paid  in,  “ with  such  portion  of  the  profits  as  the  by-laws 
may  determine.” — Not  such  portion  as  the  directors  may  determine, 
but  the  by-laws  made  by  the  stockholders  themselves  on  forming  the 
association ; and  subject  to  such  fines  and  charges  only  as  the  same  by- 
laws impose  for  a neglect  or  failure  to  pay  their  dues  promptly  and 
punctually,  with  the  exception  even  in  this  latter  case  in  favor  of  the 
deceased  members  from  the  time  of  “ his  or  her  decease.” 

But  there  is  another  provision  of  the  law  of  great  importance  to  this 
system,  to  wit:  “ That  at  no  time  shall  more  than  one-half  the  funds  in 
the  treasury  be  applicable  to  the  demands  of  the  withdrawing  stock- 
holders, without  the  consent  of  the  Board  of  Directors.”  The  Board  of 
Directors  composed  of  men  elected  annually  by  the  stockholders  from 
among  themselves,  and  not  from  a preferred  class  of  capitalists  separated 
from  them  by  wealth,  station  and  associations  entirely  different,  and 


14 


without  any  sympathies  in  common  with  them ; but  composed  of  men 
from  the  same  shop  and  work-bench,  from  the  same  trade,  occupation 
and  calling  as  themselves ; men  who  know  their  wants  because  they  feel 
those  wants,  who  know  their  best  interests,  because  they  are  common 
to  all. 

There  is  but  little  danger  therefore  of  a “ run”  or  universal  demand  by 
all  or  a great  majority  of  the  stockholders  for  their  money  at  one  time  ; 
for  in  the  first  place  they  are  required  to  give  thirty  days’  notice,  and  then 
take  their  places  in  rotation  on  the  list  of  withdrawing  members,  and  await 
their  respective  turns  of  being  paid  out  of  the  fund  appropriated  to 
their  use,  namely  : “ one-half  the  funds  in  the  treasury  ” on  each  meet- 
ing night.  Time  is  thus  given  to  the  association  to  deliberately  prepare 
itself  for  any  extraordinary  or  unusual  demand,  and  protect  those  who 
remain  in  the  association,  as  well  as  those  who  wish  to  retire,  from  un- 
necessary loss  by  hasty  or  precipitate  action.  For  if  there  was  no 
check  on  the  demands  of  withdrawing  stockholders,  and  all  the  funds  in 
hand  at  any  one  time  were  liable  to  withdrawal  and  one-fourth  of  the  stock- 
holders of  an  association  two  years  old  and  numbering  one  hundred 
and  fifty  members,  owning  an  average  of  ten  shares  each,  desired  to 
withdraw,  it  would  take  about  $10,000  to  pay  them  off,  and  if  all  the  re- 
ceipts at  a supposed  average  of  $2,500  a month  were  appropriated  to  pay 
them,  it  would  take  some  four  months  to  liquidate  their  claim,  during 
all  which  time  the  remaining  members  would  be  paying  in  their  dues  and 
gaining  no  profit  from  making  loans,  for  no  loans  could  be  made  from 
which  the  chief  profit  is  derived.  So  the  advantage  is  divided  equally 
between  the  stockholders  wishing  to  remain,  leaving  half  the  funds  to 
loan  and  invest  for  their  profit  and  accommodation,  and  those  wishing 
to  withdraw  having  the  other  half  appropriated  to  their  wants.  And 
herein  again  appears  the  strictly  mutual  feature  of  the  system. 


The  Portion  of  Profits  Withdrawn. 

The  amount  of  profits  a stockholder  is  allowed  to  withdraw  along 
with  his  dues,  is  regulated  as  previously  stated  by  the  by-laws,  and  varies 
in  different  associations  ; some  allow  six  per  cent,  on  the  dues  for  the 
averaged  time  they  are  held  in  the  association,  others  one-eighth  and 
others  again  one-tenth  of  the  profits  for  each  year  that  has  elapsed 
since  the  stock  was  issued  and  the  first  payment  made  upon  it.  Let  us 
give  some  examples  of  the  results  of  these  rules  at  the  different  rates 
of  profit  just  mentioned,  from  calculations  based  on  a supposed  average 
yearly  profit  of  $6.46^2^  per  share. 


15 


When  one-eighth  of  the  profit  per  share  is  withdrawn  with  the  dues 
the  account  would  stand  thus  per  share  : — 

Five  years’  monthly  dues,  at  $12  per  year,  ....  $60  00 
Five-eighths  of  five  years’  profits  at  $6  46y^3  per  year,  20  15 

Withdrawing  value  of  each  share, $80  15 

When  one-tenth  of  the  profit,  per  share  is  allowed,  thus  : — 

Five  years’  monthly  dues  at  $12  per  year,  ....  $60  00 
Five-tenths  of  five  years’  profits  at  $6  per  year,  16  15 

Withdrawing  value  of  each  share, $76  15 

When  six  per  cent,  simple  interest,  is  paid  for  the  average  time  each 
dollar  was  deposited,  thus  : — 

Five  years’  monthly  dues  at  $12  per  year,  ....  $60  00 
Five  years’ interest  for  averaged  time,  at  6 per  cent.  int.  9 15 

Withdrawing  value  of  each  share, $69  15 

And  when  four  per  cent,  interest  is  paid  for  the  averaged  time  each 
dollar  was  deposited  (as  most  of  the  savings  funds  pay),  supposing  the 
money  to  have  been  deposited  in  monthly  sums.  Thus  : — 

Five  years’  monthly  deposits,  at  $12  per  year,  . . . $60  00 

Five  years’  interest,  for  averaged  time  at  4 per  cent.  6 00 

Total  value  of  deposit  and  interest,  at  end  of  5yrs.  $66  00 

No  other  organized  and  carefully-guarded  scheme  or  plan  offers  itself 
to  the  working  man  by  means  of  which  he  can  save  his  money  in  small 
amounts,  and  yet  gain  in  considerably  more  than  the  average  of  cases 
over  the  legal  rate  of  simple  interest.  And  yet  this  profit  is  not  the 
result  of  wild  and  reckless  speculation,  it  is  derived  from  safe  and  well- 
considered  investments,  in  reliable  securities.  This  profit  is  paid  by 
men  who  in  place  of  being  oppressed  by  it,  derive  an  equal  and  some- 
times a greater  advantag*?  from  the  loan  they  pay  for,  than  the  non- 
borrowing stockholder  does,  and  who  are  not  only  glad  of  the  chance  to 
borrow,  but  thankful  for  it  also. 

Besides  the  portion  of  the  profits  a withdrawing  member  takes  with 
him,  there  is  also  a profit  that  remains  and  is  divided  among  the  shares 
of  stock,  owned  by  those  who  continue  in  membership,  to  wit : All  of 

the  profit  made  over  and  above  the  portion  of  profits  allowed  a with- 
drawing member.  The  remaining  profit  is  left  in  the  association  to  add 


16 


to  the  profit  accruing  from  “ premiums  ” and  “ interest  ” on  loans.  For 
the  number  of  shares,  by  which  the  year’s  profit  will  be  divided,  will  be 
lessened  by  the  number  of  shares  withdrawn  during  the  year,  and  the 
profit  to  those  who  remain  will  therefore  be  increased  by  the  with- 
drawals. This  acts  as  an  inducement  or  premium  to  members  to  stay 
in  and  pay  up  steadily  until  the  scheme  is  worked  out,  when  they  receive 
their  full  share  of  all  the  profits,  including  that  portion  the  withdrawing 
members  would  have  received  had  they  also  remained  to  the  end. 

BORROWING. 

It  has  been  shown  that  the  chief  or  main  capital  of  a Building  Asso- 
ciation is  derived  from  the  monthly  dues  paid  on  each  share  of  stock ; 
and  that  the  sole  mode  of  increasing  it  (with  the  exception  of  the 
profit  derived  from  fines,  and  that  remaining  from  the  withdrawals  of 
stock),  is  by  means  of  loaning  it  to  members  who  desire  the  use  of  it, 
and  can  give  the  required  security  for  the  repayment  of  it  in  monthly 
instalments  ; and  as  was  previously  mentioned,  from  these  loans  the  two 
main  items  of  profit  are  received,  namely,  •'^Premiums  and  Interest.” 

The  security  required  for  loans  is  of  two  kinds, — one  the  stock  of 
the  association,  and  the  other  real  estate. 

Loans  Made  on  Stock. 

Loans  made  for  which  the  stock  of  the  association  is  pledged  alone 
for  its  payment,  are  mostly  for  temporary  use,  to  help  the  borrower  over 
some  tight  pinch  in  his  affairs,  to  be  repaid  when  he  is  again  in  funds  ; 
and  the  amount  of  money  loaned  in  this  way  is  never  greater  than  the 
withdrawing  value  of  the  stock  offered  as  security.  One  owning  five 
shares  of  stock,  five  years  old,  on  which  $60  a share  has  been  paid  in 
dues,  and  to  which  an  aver;;ge  profit  of  seven  dollars  a year,  or  $35, 
has  been  added,  making  the  stock  worth  $95  per  share,  could  borrow 
about  $350  upon  it,  to  start  a little^  business  with,  or  meet  a sudden 
demand  for  more  money  than  his  ordinary  income  will  satisfy ; and 
when  he  is  in  funds  again,  he  can  pay  it  off,  and  assume  his  original 
position  in  the  association ; or,  on  the  other  hand,  he  can  keep  the  loan 
until  his  five  shares  reach  the  ultimate  value  of  $200  per  share,  when  he 
will  find  his  loan  paid  off,  and  some  $600  coming  to  him  as  the  balance 
due  him  on  his  stock,  over  and  above  what  was  advanced  to  him  by  way 
of  a loan. 

Loans  Made  on  Real  Estate. 

The  legitimate  object  of  the  Building  Association  is  apparent 
throughout  the  whole  system,  and  in  every  part  of  its  structure ; that 


ii 

object  is  exclusively  to  benefit  that  class  of  persons  who  may  be  desig- 
nated under  the  general  head  of  employes,  embracing  all  persons 
whose  wages,  salaries  or  incomes,  are  certain  but  limited,  and  who  are 
able  to  save  but  little  out  of  their  receipts,  over  and  above  the  expenses 
of  living.  The  capitalist  needs  no  such  aid  as  this  system  offers,  for  he 
is  already  in  the  position  this  system  proposes  to  aid  the  man  of  no 
capital  in  reaching.  It  is  too  slow  a process  for  the  man  who  designs  to 
live  out  of  the  proceeds  arising  from  rapid  turning  of  a large  or  small 
capital.  And  yet  of  all  known  plans,  it  is  the  most  rapid,  sure; 
and  effectual  one  for  the  industrious  man  of  very  small  means,  or,  in 
fact  no  means  at  all,  to  accumulate  a capital. 

The  object  of  this  chapter  is  to  show  not  only  the  manner  of  apply- 
ing the  privilege  of  borrowing  to  the  purposes  of  saving,  but  to  further 
show  that  it  is  the  only  way  in  which  persons  under  certain  circum- 
stances can  possibly  save  and  accumulate  money. 

The  previous  chapter  explains  the  result  of  mere  saving  by  depositing 
monthly  instalments  in  an  association,  by  one  who  has  no  other  expense 
than  that  necessary  to  his  own  support, — persons  who,  having  no  fam- 
ily to  provide  a home  for,  are  not  under  the  necessity  of  paying  rent. 

The  following  portion  of  this  present  chapter  will  show  the  peculiar 
privileges  held  out  to  the  working  man  of  family  by  the  Mutual  System. 
It  will  show  him  that  without  working  one  stroke  harder  than  he  has 
ever  worked  before,  if  he  is  an  ordinary  sober  and  industrious  man, 
that  without  increasing  his  income  from  wages  one  cent  a year  more 
than  the  usual  average  he  has  previously  received  from  steady  employ- 
ment, he  will  be  able  to  save,  by  borrowing  from  a Building  Associ- 
ation. 

Rent  Must  be  Paid. 

Every  man  of  family,  no  matter  how  limited  his  means,  must  provide 
a home  for  his  family  ; and  such  a man,  having  the  natural  feelings  of  a 
husband,  father  and  good  citizen,  will  labor  very  hard  to  keep  that 
home  above  him.  For  this  home  rent  must  be  paid;  and  it  is  a well- 
known  fact  that  the  class  of  houses  usually  occupied  by  working  men,  pays 
a much  larger  percentage  of  rent  on  the  capital  invested  in  them  than 
the  larger,  more  expensive  and  elegant  residences  of  those  in  the  en- 
joyment of  larger  incomes  than  working  men  can  command. 

It  is  the  case  with  a large  majority  of  the  working  people  of  this,  as 
well  as  other  countries,  that  they  live  from  hand  to  mouth;  in  other 
words,  the  end  of  every  month  and  every  year  finds  them  — if,  indeed, 
with  all  their  little  debts  paid, — with  nothing  laid  by  to  meet  the  ordi- 
nary contingencies  of  sickness,  loss  of  employment,  or  the  like ; and 


8 


1 

18 

• 

this  though  a man  may  be  industrious,  sober,  healthy,  frugal,  constantly 
employed,  and  punctually  paid  for  his  labor.  The  size  of  his  family, 
the  smallness  of  his  wages,  or  some  other  cause  other  than  tippling  and 
dissipation  (for  there  is  little  hope  of  the  drinking  man  saving  himself, 
let  alone  his  money),  keeps  him  always  at  the  extremity  of  spending 
his  last  cent.  He  never  seems  to  get  ahead ; he  is  constantly  in  the 
drag.  If  he  gets  a 'dollar  in  advance  to-day,  some  unexpected  necessity 
puts  him  a dollar  behind  to-morrow.  There  is  one  item,  however,  he 
always  manages,  by  the  utmost  effort,  to  keep  paid  up  with  a tolerable 
degree  of  promptness, — this  item  is  rent.  To  keep  a home  for  his  wife 
and  little  ones,  everything  else  must  give  way.  Little  luxuries,  little 
comforts,  even  necessaries,  must  stand  aside,  to  enable  him  to  meet  the 
demand  of  his  landlord  for  his  rent. 

The  Money  Paid  for  Rent  will  buy  a House. 

If,  then,  the  closely-driven  man  will  labor  so  hard,  and  suffer  so  much 
to  meet  the  landlord’s  claims,  would  he  not  work  harder,  and  suffer 
more,  to  meet  his  payments  if  he  himself  were  the  landlord,  and  the 
money  he  paid  was  not  departing  to  return  no  more,  and  without  leaving 
him  an  equivalent  for  it,  but  was  gradually  buying  his  house  and  paying 
for  it?  Would  he  not  work  with  greater  satisfaction,  being  able  all  the 
while  to  count  the  day  when,  with  but  ordinary  success,  he  would  own 
his  home,  in  a great  part  free  from  debt?  There  can  be  but  one 
answer  to  these  questions. 

It  is  chiefly  owing  to  this  mutual  system  of  building  associations  that 
thousands  of  working  men  in  the  city  of  Philadelphia  alone  (not  to 
mention  other  parts  of  the  State  of  Pennsylvania),  to-day  own  and 
occupy  their  own  houses,  and  possess  others  besides,  from  which 
they  receive  handsome  little  incomes  in  rents.  Nnmerous  instances 
can  be  pointed  out,  of  mechanics  and  laboring  men  who  have  worked 
all  their  lives  at  their  callings  as  journeymen  and  day  laborers, 
and  raised  large  families  of  children,  and  who  are  to-day  worth  from 
$10,0U0  to  $20,000,  all  made  and  saved  through  Building  Associntions. 
The  course  is  clear  and  certain.  “ What  man  has  done,  man  can  do 
again.”  Keep  in  mind  the  words  of  the  wise  man,  “ If  any  one  tells 
you  that  the  working  man  can  become  rich  otherwise  than  by  labor  and 
saving,  do  not  listen  to  him,  he  is  a poisoner.” 

How  It  Can  Be  Done. 

A tenant,  renting  a house  at  $15  per  month,  will  pay  to  his  landlord 
$180  per  year,  or  $1,800  in  ten  years,  while  the  same  money,  pajd  to  a 


19 


Building  Association,  will  buy  the  same  house  (or  at  least  a greater  part 
of  it),  within  a period  of  from  eight  to  ten  years.  Now,  if  a hard- 
pressed  working  man  can  save  nothing  more  than  this  item  of  rent  out 
of  the  entire  proceeds  of  his  labor,  is  it  not  better  to  do  so  than  not  to 
attempt  to  save  at  all?  Is  it  not  better  than  to  absolutely  throw  it 
away  forever,  by  paying  it  as  rent?  But  let  us  examine  this  matter  a 
little  more  closely. 

A house  renting  for  $15  per  month,  such  as  is  usually  occupied  by 
working  men,  will  sell  for  about  $1,500.  Nearly  all  the  houses  in  the 
city  of  Philadelphia,  both  large  and  small,  have  an  incumbrance  upon 
them,  either  a ground  rent  or  mortgage,  of  at  least  one-third  their 
value.  One  reason  for  this  exists  in  the  fact  that  buyers  prefer  to  pur- 
chase subject  to  an  encumbrance ; firstly,  because  it  takes  less  ready 
cash  to  make  the  purchase,  and  secondly,  because  if  the  house  is  rented, 
it  pays  the  purchaser  a better  per  centage  on  the  investment  than  if 
purchased  clear  of  all  incumbrances  by  an  outlay  of  the  entire  cash 
value  of  the  house.  For,  if  one  purchase  an  unincumbered  house  at 
$1,500,  renting  for  $180  per  year,  this  would  give  him  just  twelve  per 
cent,  on  the  investment  of  $1,500;  while  if  he  purchased  for  $1,000 
cash,  subject  to  a ground  rent  of  $30,  or  a mortgage  of  $500,  the  yearly 
interest  of  which  would  be  $30,  he  would  realize  fifteen  per  cent,  on  the 
$1,000  invested,  after  deducting  the  interest  on  the  incumbrance,  in 
place  of  twelve  per  cent,  if  he  purchased  clear, — just  $30  a year  in  favor 
of  an  incumbered  property.  Now,  to  proceed  with  the  illustration  : take, 
for  example,  a dwelling  that  can  be  purchased  for  $1,500,  subject  to  a 
ground  rent  of  $30  per  year  (the  principal  of  which  would  be  just  $500), 
or  a mortgage  of  $500,  the  interest  of  which  would  be  the  same  as  the 
ground  rent  ($30).  The  price  being  $1,500,  and  the  incumbrance  $500, 
of  course  it  would  take  $1,000  cash  to  pay  for  it.  By  means  of  the 
Building  Association,  the  purchase-money  can  be  raised,  thus:  the 
purchaser,  if  not  already  a member,  owning  stock,  subscribes  to  a suffi- 
cient number  of  shares  to  enable  him  to  make  up  the  sum  of  money 
necessary  to  complete  the  purchase,  after  deducting  the  premium 
he  bids  for  it.  If  he  has  been  a frugal  man  before  this,  he  may  have 
accumulated  a little  money  by  saving.  It  is  not  often  an  association 
will  loan  one  enough  to  pay  down  the  entire  cash  required  ; they  require 
a slight  margin  above  their  loan,  as  an  earnest  of  good  faith  and  inten- 
tion on  the  part  of  the  borrower,  to  perform  his  part  of  the  bargain. 
This  margin  is  necessary  for  the  borrower  to  make  up  himself ; though, 
it  might  be  observed  here,  that  even  this  rule  is  sometimes  relaxed, 
when  the  borrower  is  evidently  getting  a bargain,  and  is  well  known  as 
an  honest,  industrious,  sober  and  capable  workman,  through  a kindly 


20 


feeling  on  the  part  ■’of  his  fellow-members,  to  give  him  the  benefit  of 
every  advantage  consistent  with  safety  to  the  association. 

The  amount  of  money  realized  in  actual  cash  will,  of  course,  be  reg- 
ulated by  the  premium  bid  for  the  money  at  the  auction  sale  of  it  at  the 
meeting.  If  he  borrows  upon  six  shares,  he  will  be  entitled  to  a loan 
of  $1,200,  with  the  premium  off.  If  the  premium  should  reach  twenty- 
five  per  cent.,  or  a total  of  $300,  he  would  realize  $900,  or  $100  short 
of  the  price  of  his  house.  If  he  bids  thirty  per  cent.,  and  the  loan  is 
granted  him  at  that  premium,  he  will  realize  $840,  or  $160  short  of  the 
priee  of  his  house ; and  so  on.  So  that  whatever  is  the  amount  of 
difference  between  the  sum  thus  realized  from  the  loan  and  the  purchase- 
money  of  the  house,  this  difference  must  be  made  up  out  of  the  bor- 
rower’s own  pocket,  in  some  way. 

We  will  suppose,  however,  that  one  is  able  to  get  his  loan  at  twenty- 
five  per  cent,  premium  off.  There  would  therefore  be  deducted  from 
the  par  value  of  each  share  $50,  leaving  $150,  or  $900  on  six  shares. 
To  this  he  adds  his  own  $100,  and  pays  for  the  house,  secures  the  asso- 
ciation’s loan  by  a mortgage  on  the  house  for  $1,200  (subject  to  the 
prior  incumbrance),  to  secure  his  future  monthly  payment  of  $12  each, 
or  $2  per  share,  becomes  the  owner  of  his  former  tenement,  and  his 
own  landlord ; and  as  such  let  us  see  how  his  yearly  account  would 


stand : — 

Yearly  ground  rent  or  interest, $ 30  00 

Taxes,  etc.,  (about), 20  00 

Yearly  total  of  monthly  dues  and  interest  to  the 

association,  at  $12, 144  00 

Yearly  interest  on  $100  advanced  by  himself,  . . 6 00 

Total  yearly  expenses  as  owner, $200  00 

Former  rent  as  tenant,  180  00 

Yearly  difference  between -his  two  positions,  . . . $ 20  00 


So  that  the  house  actually  costs  him,  to  clear  it  of  the  association’s 
mortgage,  just  $300  more  in  ten  years  than  he  would  pay  as  tenant. 

By  this  illustration  it  is  shown  that  by  paying  $20  more  per  year  for 
from  eight  to  eleven  years,  as  purchaser,  than  was  paid  as  tenant,  he 
becomes  the  owner  of  the  house,  with  money  that  was  formerly  sunk 
forever  in  paying  rent. 

The  foregoing  example  supposes  the  case  of  a closely-driven  working 
man  of  industry  and  energy.  Those  who  can  earn  better  wages  can 
form  an  example  to  suit  their  several  cases,  using  the  foregoing  figures 
and  those  that  follow,  as  a starting  point  on  which  to  base  their  calcu- 
lations for  a larger  operation. 


21 


But  let  us  follow  this  closely- driven  working  man  still  further.  In 
from  eight  to  ten  years,  as  shown  in  a former  chapter,  these  monthly 
payments  of  $12  to  the  association  cease,  the  loan  is  cancelled  and 
satisfied  by  the  value  of  the  stock  upon  which  the  loan  was  made.  The 
borrower  is  therefore  owner  of  the  house,  clear  of  that  debt.  He  now 
has  $144  a year  free  from  any  imperative  demand.  He  has  learned 
the  art  of  saving ; it  is  now  no  trouble  to  do  so.  He  is  able  to  take 
twelve  shares  in  the  association  and  pay  the  dues  with  his  now  released 
$12  a month ; and  thus  become  one  of  the  non-borrowing  class  of 
stockholders  previously  mentioned,  and  in  eight  or  ten  years  he  has 
$2,400  in  cash.  In  the  meantime,  his  little  property  has  increased  in 
value,  probably  to  $2,000,  by  reason  of  surrounding  improvements 
and  advanced  prices. 

Or,  to  take  another  view  of  it,  let  us  suppose  that  in  place  of  becom- 
ing a non-borrowing  stockholder,  he  again  becomes  a borrower. 
Seeing  a house  similar  to  the  one  he  owns,  in  price,  size,  etc.,  he  buys  it, 
borrows  the  money  in  the  same'  way,  and  rents  it  to  some  industrious 
working  man,  who  will  not  believe  that  a Building  Association  is 
anything  but  a snare  and  a humbug,  and  therefore  persists  in  being  a 
tenant  all  his  days.  To  simplify  the  illustration,  suppose  he  rents  it 
for  $15  per  month,  or  $180  a year.  It  will  therefore  be  but  $20  a year 
short  of  the  annual  sum  necessary  to  keep  the  interest,  dues,  and  taxes 
paid  up,  and  this  difference  can  be  supplied  from  his  $144,  now  free. 
This  operation  can  be  repeated  as  often  as  his  thrift,  energy,  and  en- 
terprise, patience,  and  perseverance  will  enable  him  to  see  the  propitious 
moment,  and  seize  the  opportunity.  There  is  no  saying  to  what  degree 
of  ultimate  success  such  a course,  faithfully  and  persistently  carried 
out  on  the  part  of  any  future  operator,  would  finally  lead  to  ; but  we 
can  point  to  many  hundreds  of  working  men,  as  living  examples  of  the 
truth  of  all  that  is  figured  in  the  foregoing  imaginary  case.  And  lest 
it  might  be  inferred  that  these  examples  are  overdrawn  by  too  zealous 
an  advocate  of  the  system,  it  may  be  well  to  state  that  there  are  numerous 
instances  on  record,  where  purchases  have  thus  been  made  with  money 
borrowed  as  shown  above,  the  rent  from  which  not  only  kept  the  dues, 
interest,  taxes  and  all  other  expenses  fully  paid  up,  but  in  addition  re- 
turned the  owner  a considerable  sum  as  a clear  yearly  profit  during 
the  entire  running  of  the  loan  ; resulting,  in  effect,  in  the  owner  actually 
getting  his  house  clear  on  the  running  out  of  the  stock,  it  having  been 
paid  for  by  the  tenant,  with  his  rent,  and  leaving  him  considerable 
cash  besides.  And  all  this  without  in  the  least  infringing  upon  the 
rights  and  interests  of  the  particular  association,  or  any  single  member 
of  it. 


22 


Paying  Off  a Loan  or  Returning  the  Borrowed  Money 
Before  the  Ultimate  Result  is  Reached. 

As  has  been  shown,  a member  who  has  not  borrowed  can  withdraw  at 
any  time  by  giving  thirty  days’  notice,  subject  to  the  proviso  restrict- 
ing one-half  of  the  funds  in  the  treasury,  to  that  purpose.  So  also  can 
a member  who  has  borrowed,  to  use  the  language  of  the  law,  Repay 
his  loan  at  any  time  ” (without  any  special  notice),  “ and  in  case  of  the 
repayment  thereof  before  the  expiration  of  the  eighth  year  after  the 
organization  of  the  corporation,  there  shall  be  refunded  to  such  bor- 
rower one-eighth  of  the  premium  paid,  for  every  year  of  the  said  eight 
years  then  unexpired.” 

Under  this  rule,  first  the  dues  will  be  refunded  to  the  stockholder, 
with  the  proportion  of  profits  allowed  according  to  the  by-laws  of  the 
particular  association  he  may  be  connected  with,  as  was  hereinbefore 
explained  under  the  head  of  “ withdrawals.”  Secondly.  There  will  be 
refunded  to  him  one-cighth  of  the  premium  he  paid  on  taking  his  loan 
for  each  of  the  “ eight  }^ears  then  unexpired,”  since  the  organization  of 
the  association,  or  the  issue  of  the  particular  series  of  stock  on  which 
the  loan  was  made.  The  sum  ascertained  to  be  the  total  amount  of  dues 
and  profits  the  stockholder  is  entith'd  to,  and  the  sum  ascertained  to  be 
to  the  total  amount  of  premium  to  be  returned  to  him,  are  then  added 
together,  and  the  sum  thus  obtained  will  be  deducted  from  the  amount 
of  the  whole  face  of  the  loan,  and  the  balance  remaining  will  show  the 
amount  of  cash  required  to  pay  off  the  loan.  For  instance,  suppose  one 
had  borrowed  the  sum  of  $1,000,  on  five  shares  of  stock,  at  25  per  cent, 
premium  off,  and  the  series  of  stock  on  which  the  loan  had  been  made 
was  four  years  old  at  the  time  of  withdrawing  it,  to  aid  in  paying  off  the 
loan.  If  the  association  allowed  one-tenth  of  the  profits  on  withdraw- 
ing, he  would  be  entitled  to  four  years’  dues  and  one-tenth  of  the  profits 
for  each  of  the  four  years  past.  Supposing  the  yearly  profits  to  have 
been  at  the  average  rate  of  $6.46  per  share,  his  dues  would  stand  as 


follows  : — 

Four  years’  dues  on  each  share  at  $12  per  year,  . . $18  00 

Four-tenths  of  four  years’  profits,  at  $6.46  per  year,  . 10  32 

Withdrawing  value  of  each  share, $58  32 

Multiplied  by  five  shares, 5 

$291  60 


In  the  second  place,  having  paid  twenty-five  per  cent,  premium  for 
the  loan  of  $1,000,  or  $250  off,  there  would  be  deducted  from  this  pre- 


23 


mium,  one-eighth  of  it  for  each  of  the  eight  years  yet  unexpired.  In 
this  case  (the  loan  being  four  years  old)  there  would  be  four  years 
unexpired,  which  would  make  four-eighths  or  one-half  of  the  premium 
to  be  deducted,  leaving  $125  to  add  to  the  dues  and  profits  returned, 
making  together  the  sum  of  $416.60,  which,  deducted  from  the  sum  of 
$1,000,  leaves  $583.40  cash  necessary  to  pay  off  the  loan,  viz : — 


Five  shares,  dues  and  profits  returned,  ....  $291  60 

Four-eighths  or  one-half  of  $250  returned,  . . . 125  00 

Cash  necessary  to  pay  off  loan, 583  40 


Full  ammunt  of  original  loan, $1,000  00 


The  foregoing  statement  is  intended  to  show  the  operation  of  the  rule 
for  paying  off  loans  at  any  time  before  the  regular  closing  out  or  wind- 
ing up  of  the  series  of  stock  on  which  the  loan  was  originally  obtained  ; 
or,  in  other  words,  before  its  ultimate  value  of  $200  per  share  is 
reached.  It  will  be  ascertained,  by  calculation,  that  in  most  cases  in 
repaying  loans  in  this  way,  the  borrower  will  pay  at  the  rate  of  more 
than  six  per  cent,  interest  on  the  actual  cash  received  by  him  for  the 
time  it  is  employed.  The  practice  of  thus  paying  off  loans  is  not  en- 
couraged by  the  policy  of  the  “ Mutual  System,”  it  is  by  stayiug  in  and 
holding  on  to  the  loan  and  working  through  the  series  until  the  ultima|;e 
value  of  $200  is  reached,  that  the  profits  and  losses  are  equalized,  and 
the  advantages  gained,  wliic,h  reduce  the  premium,  and  interest  paid  on 
a loan,  to  an  equality  with  a transaction  made  in  the  ordinary  way  at 
six  per  cent,  interest. 

It  must  be  kept  in  view  that  this  “ Mutual  System,”  was  originated 
by  working  men  for  the  benefit  of  working  men,  to  enable  them  to  save 
in  small  sums  as  their  wages  are  received.  So  that  while  they  invest 
these  small  sums,  they  can  at  once  begin  to  receive  the  benefit  of  an 
equal  portion  of  all  the  profits  on  the  sum  invested,  by  lending  it  to 
their  fellow-members,  and  not  have  to  await  the  slow  and  profitless  pro- 
cess of  accumulating  a large  sutn  before  finding  an  investment  for  it. 
It  is  a system  requiring  a certain  period  of  time,  certain  combinations, 
and  the  united  and  harmonious  action  of  its  members  to  work  out  its 
results,  and  it  is  very  apparent  that  to  withdraw  one’s  money  or  pay 
back  a loan  before  the  ultimate  results  are  attained  in  a certain  measure, 
disturbs  the  even  flow  of  the  scheme,  and  therefore  it  is  not  desired,  and 
is  required  to  be  paid  for  as  a privilege,  by  the  withdrawing  stockholder 
and  repaying  borrower.  And  a borrower  seldom  repays  a loan  before 
it  runs  out  its  full  course,  unless  circumstances  warrant  it ; such  as  the 
sale  of  his  house  at  an  advance  over  what  he  paid  for  it,  sufficient  to 
pay  him  well  for  the  loss  on  his  loan,  or  the  near  approach  of  the  final 


24 


payments  reduce  the  balance  due  to  a mere  nominal  sum,  that  is  of  little 
moment  compared  to  the  satisfaction  of  wiping  out  the  debt  at  once,  and 
thus  anticipating  by  some  months,  perhaps,  the  last  payment  of  the 
monthly  dues  and  interest. 

Premiums. 

The  premium  is  a bonus  charged  to  a stockholder  wishing  to  borrow, 
for  the  privilege  of  anticipating  the  ultimate  value  of  his  stock,  by 
obtaining  the  immediate  use  of  the  money  his  stock  will  be  worth  at 
the  winding-up,  namely  $200  per  share.  He  is  thus  enabled  to  buy  a 
house  and  pay  for  it  at  once,  with  the  borrowed  money,  and  enter  right 
into  the  ownership  and  occupancy  of  it,  in  place  of  waiting  eight  or  ten 
years  for  his  money  to  reach  an  amount  sufficient  to  entitle  him  to  do 
so,  and  in  addition  be  paying  rent  for  the  house  he  occupies  until  that 
result  is  reached.  The  obligation  he  gives  to  the  association  is  nom- 
inally for  the  repayment  of  the  loan,  but  particularly  for  the  payment 
of  the  monthly  dues  on  the  stock  and  legal  interest  on  the  loan  until 
the  association  is  able  to  divide  to  each  share  of  stock  held  by  the  mem- 
bers, the  sum  of  $200,  and  when  this  result  is  reached,  as  the.associa- 
tion  would  owe  a borrower  on  five  shares  of  stock  $1,000,  and  the 
borrower  would  also  owe  the  association  $1,000,  one  debt  cancels  the 
other,  and  the  loan  is  paid  off,  and  the  house  that  was  held  as  security 
for  the  loan,  is  released. 

This  premium,  however,  is  a great  stumbling-block  in  the  way  of 
many  to  a clear  view  of  the  peculiar  advantage  contained  in  the  “ Mu- 
tual System.”  “ The  system  may  be  good  enough,”  they  say,  “but  we 
cannot  see  how  any  one  can  borrow  to  advantage  at  such  a heavy  dis- 
count.” Now  it  is  not  pretended  that  the  higher  the  premium,  the 
greater  is  the  advantage  to  the  individual  borrower ; there  doubltess  is 
a limit  beyond  which  it  is  not  wise  to  go,  and,  as  to  that,  every  borrower 
must  judge  for  himself  what  that  limit  is,  and  regulate  his  bidding 
accordingly.  Let  us  compare  the  results  of  borrowing  at  both  low  and 
high  rates  of  premium. 

It  has  been  previously  stated  as  a guiding  rule  that  the  time  required 
for  a series  of  stock  to  run  out,  or  reach  its  ultimate  value  of  $200  per 
share,  is  regulated  by  the  amount  of  profit  divided  to  each  share  of 
stock  at  the  end  of  each  year.  (See  examples  1,  2 and  3,  Chap.  IV.) 
That  an  association  dividing  $6.46j^3  per  share  each  year  will  expire  in 
ten  years  and  ten  months ; one  dividing  $8  per  share  each  year,  will 
run  out  in  ten  years  ; and  one  dividing  $13  per  year  will  reach  its  ulti- 
mate value  in  eight  years.  It  is  plainly  shown,  then,  that  the  larger  the 
premium  paid  for  loans,  the  larger  the  profit  will  be,  and  the  * larger  the 


25 


profit,  the  sooner  the  stock  will  reach  the  ultimate  value  of  $200.  So 
that  when  one  loses  by  a high  premium  (when  the  premiums  mostly 
average  a high  figure,  as  where  the  stock  is  issued  in  series),  he  gains 
by  the  less  number  of  years  he  is  required  to  pay  dues  and  interest ; and 
again,  what  he  gains  by  a low  premium  (when  premiums  are  always  at  a 
low  average,  as  in  associations  with  but  one  issue  of  stock)  he  loses  by 
the  greater  number  of  years  he  is  required  to  pay  his  dues  and  interest. 

There  is  two  years  and  ten  months’  or  thirty-four  months’  difference 
between  the  longest  and  shortest  period  given  in  this  volume,  for  the 
winding  up  or  running  out  of  a series  of  stock.  So  that  a non-bor- 
rowing stockholder  would  pay  some  $34  more  dues  and  a borrower, 
twice  that  sum  in  dues  and  interest  on  each  share,  during  the  running 
of  the  longest  period.  For  example,  suppose  one  borrows  from  an 
association  that  by  reasons  of  its  large  premiums  is  able  to  wind  up  in 
eight  years,  a loan  on  five  shares  of  $1,000,  at  forty  per  cent,  premium, 
he  would  realize  $600  in  cash,  and  thereafter,  pay  ten  dollars  per  month 
dues  and  interest,  or  $120  per  year  for  eight  years,  at  the  end  of  that 
time  he  will  have  paid  $960  : just  $360  more  than  he  received  and  the 
debt  is  paid.  If  one  borrows  $600  in  the  regular  way,  at  six  per  cent., 
simple  interest,  for  eight  years,  the  interest  for  that  time  will  amount 
to  $288,  which,  added  to  the  loan,  makes  $888  principal  and  interest 
against  $960  paid  in  the  same  time  to  the  Building  Association,  which 
latter  payment  is  only  $9  a year,  or  seventy-two  dollars  in  eight  years 
in  excess  of  legal  interest,  a very  small  sum  compared  with  the  privi- 
lege it  aids  one  to  obtain.  Now  suppose  he  were  to  borrow  the  same 
amount  ($1,000  on  five  shares)  from  an  association  which  by  reason  of 
its  smaller  profits,  is  unable  to  run  out  in  less  than  ten  years  and  ten 
months,  and  were  to  pay  only  twenty  per  cent,  premium,  he  would 
therefore  realize  $800  in  cash,  with  the  premium  off,  and  would  of 
course  pay  the  same  amount  of  dues  and  interest,  $10  a month,  or  $120 
a year,  and  in  ten  years  and  ten  months  he  would  pay  just  $1,300  or 
$500  more  than  he  received.  Now  let  us  apply  the  6 per  cent,  rule  to 
this  case  also.  If  $800  were  borrowed  for  ten  years  and  ten  months,  at 
six  per  cent,  interest,  the  interest  paid  for  the  whole  time  would  amount 
to  $520,  making  $1,320  principal  and  interest,  or  $20  more  than  would 
be  paid  to  the  association  in  the  same  length  of  time,  so  that  the  loan  , 
from  the  association  would  be  actually  twenty  dollars  less  than  legal 
interest  for  the  time  it  is  held.  It  will  be  seen  from  the  foregoing 
figures  taken  from  examples  of  every-day  occurrence,  that  the  objection 
to  premiums,  and  the  charge  of  oppressive  usury,  so  often  preferred 
against  this  system,  fade  away  into  nothingness  on  examination,  and 
fair  comparison,  and  even  in  cases  where  a loan  results  in  the  payment 
of  a sum  slightly  in  excess  of  legal  interest  at  the  end  of  the  transaction. 

8 


26 


this  excess  is  a mere  atom  in  comparison  to  the  advantage  gained  by 
the  borrower,  by  means  of  which  he  gains  a position  to  be  reached  by 
the  working  man  in  no  other  way. 


Paying  Premiums  in  Monthly  Instalments. 

In  some  associations  organized  of  late  years,  it  is  the  rule  not  to 
deduct  the  premium  from  the  face  of  the  loan,  on  paying  the  borrower 
his  money,  but  to  require  him  to  pay  it  in  monthly  instalments.  In 
some  cases  it  is  a premium  charged  on  each  share,  and  in  others  a per- 
centage on  the  amount  of  money  borrowed. 

In  the  first  instance,  the  premium  charged  is  from  fifty  cents  up  to  one 
and  two  dollars  per  share  as  the  competition  is  greater  or  less,  and  is 
paid  monthly  during  the  running  of  the  loan,  in  addition  to  the  monthly 
dues  and  interest  of  $1  per  share  each. 

In  the  latter  case  the  premium  is  a percentage  on  the  amount  bor- 
rowed, and  is  divided  up  into  monthly  instalments,  and  is  thus  paid  with 
the  dues  and  interest  until  the  full  amount  of  premium  bid  is  finally 
paid,  when  the  monthly  instalments  of  the  premium  cease  and  the  dues 
and  interest  continue  until  the  winding  up  of  the  transaction. 

This  plan  of  paying  premiums  monthly,  seems  to  meet  with  the  oppo- 
sition of  many  well  versed  in  the  theory  and  practice  of  the  mutual 
system.  There  is  not  room,  however,  within  the  limits  of  this  work  to 
enter  fully  into  its  merits  or  discuss  its  objections. 

It  certainly  has  advantages  and  objections,  as  well  as  its  advocates 
and  opponents.  Its  chief  advantages  seem  to  exist  in  the  fact  that  it 
gives  the  borrower  all  the  money  in  hand  at  once.  But  at  the  same  time 
it  increases  his  monthly  payments  by  the  addition  of  the  monthly  pro- 
portion of  the  premium  to  the  dues  and  interest  paid  monthly,  and 
thus,  while  he  pays,  in  most  cases  under  this  plan,  a much  larger  pre- 
mium, he  pays  it  in  monthly  instalments. 

The  chief  objection  urged  against  this  plan  seems  to  be,  that  it  has  a 
tendency  to  induce  wild  and  reckless  bidding  by  the  thoughtless  and 
those  ignorant  of  its  effect.  The  result  is,  that  premiums  under  this 
rule  often  reach  rates  as  high  as  fifty  and  sixty  per  cent.,  making  the 
monthly  payment  a burden,  not  felt  at  first,  perhaps,  but  which  in  time 
becomes  oppressive  to  the  working  man  whose  income  is  limited- 
Though  it  is  urged  again,  on  the  other  hand,  that  where  large  premiums 
are  the  rule,  the  association  will  terminate  sooner  by  reason  of  its  large 
profits,  and  that  while  a borrower  pays  larger  monthly  instalments,  he 
really  pays  no  more  money  in  the  end,  owing  to  the  sooner  termination 
of  his  payments,  than  he  would  under  the  rule  that  deducts  the  pre- 


27 


* mium  at  once  from  the  face  of  the  loan  on  granting  it.  This  theory  is 
correct,  and  a reference  to  examples  No.  1,  2 and  3,  will  prove  that  the 
time  required  in  reaching  the  ultimate  result  is  regulated  entirely  by 
the  amount  of  profits  made  during  that  time.  But  the  practical  effect  of 
this  plan,  it  is  thought,  will  be  found  to  be  more  burdensome  to  the 
borrower,  than  the  old  one ; it  also  multiplies  and  complicates  the  ac- 
counts of  the  association,  and  is  a departure  from  that  simplicity  so 
necessary  to  the  clear  understanding  and  proper  working  of  the  mutual 
system.  However,  it  is  a new  idea, — at  least  in  Pennsylvania, — and 
should  be  fairly  tested. 

Discounts  on  Premiums. 

A discount  is  allowed,  or  in  other  words,  a deduction  is  made  on  the 
premium  bid  for  a loan  under  the  following  circumstances  : — 

Where  a member  has  simply  paid  dues  on  a certain  series  of  stock, 
without  borrowing  for  one  or  more  years,  and  then  borrows,  an  allow- 
ance of  ten  per  cent,  is  made  upon  the  premium  bid  (the  rate  it  is 
believed  most  usual)  for  each  year  that  has  expired  since  the  series  of 
stock  on  which  he  borrows  was  issued. 

For  instance,  were  he  to  borrow  on  a series  of  stock  any  time  during 
the  running  of  the  second  year  of  its  existence,  say  at  thirty  per  cent, 
he  would  be  allowed  a deduction  at  ten  per  cent,  oflf  the  premium,  thus 
reducing  the  premium  to  twenty-seven  per  cent.  If  the  stock  is  in  its 
third  year,  twenty  per  cent,  will  be  deducted,  reducing  the  premium  to 
twenty-four  per  cent.  If  it  is  in  its  sixth  year,  or  fifty  per  cent, 
will  be  deducted,  reducing  the  premium  to  fifteen  per  cent. 

This  is  manifestly  a just  and  reasonable  provision,  as  it  would  be 
unfair  to  charge  one  as  much  premium  for  the  use  of  money  borrowed 
in  the  second,  third  or  fifth  year  of  a series  as  is  charged  one  borrowing 
during  the  first  year,  and  who  would  thus  have  the  use  of  the  money 
during  the  entire  running  of  the  series. 

Interest. 

The  interest  charged  on  the  loan  is  never  more  than  the  legal  rate 
(six  per  cent.),  on  the  face  of  the  loan,  and  in  some  associations  inter, 
est  is  only  charged  upon  the  amount  of  money  received  by  the  borrower 
after  the  premium  is  deducted,  and  interest  is  calculated  upon  the 
amount  remaining  due,  monthly,  thereafter.  This  last  provision  is 
opposite  in  its  results,  upon  the  working  out  of  the  time  of  the  pay- 
ments, to  that  of  paying  the  premium  in  instalments  ; for  it  prolongs  the 
time  of  these  payments,  as  it  reduces  the  annual  profit  of  the  invest- 
ment. For  every  month,  as  the  payment  of  dues  is  made,  and  the 


28 


amount  still  remaining  due  is  thereby  reduced,  of  course,  the  monthly 
interest  gradually  grows  less,  there  is  consequently  a less  amount  of 
interest  to  be  compounded.  Therefore,  what  is  gained  by  small  pay- 
ment is  lost  by  the  greater  number  of  months’  payments,  which  must 
continue  to  reach  the  final  result. 

It  would  seem  then  that  the  mode  of  deducting  premiums  on  granting 
the  loans  and  charging  interest  on  their  full  face,  in  addition  to  being 
the  simplest  and  least  complicated  way,  more  easily  understood  and 
requiring  less  calculation  to  effect  it,  also  seems  to  strike  nearer  the 
happy  medium,  and  divides  and  distributes  the  burden  of  repayment, 
more  equally  as  regards  both  time  and  money. 


Note. — On  the  following  pages  will  be  found  the  annual  statement 
of  an  active  and  successful  Building  Association  of  several  years  standing, 
issuing  its  stock  in  yearly  series.  A careful  study  of  the  various  items 
set  forth  in  it  will  show  the  working  out  in  every-day  practice  of  the 
Mutual  system,  as  explained  in  the  preceeding  pages.  The  first  series 
is  shown  to  have  reached  its  “ ultimate  value”  of  $200  per  share,  while 
the  ninth  series  is  but  one  year  old. 

The  object  in  giving  this  annual  statement  is  to  show  that  the  calcu- 
lations and  illustrations  hereinbefore  given,  are  based  on  actual 
experience,  and  not  on  vague  theories. 


Tenth  Annual  Statement  of  a Building  Association. 
Assets. 

Balance  of  Loans  (Bonds  and  Mortgages) 

at  last  Report, $44,500  00 

Loans  made  during  the  year, 40,200  00 


84,700  00 

Loans  paid  off  during  the  year, 9,300  00 

Present  balance  of  Loans  (Bonds  and  Mortgages),  . . $75,400  00 

Balance  of  Cash  in  the  Treasury, 2,238  24 

$77,638  24 

\osses. 

$319  10 
17,681  54 


Total  Expenses,  for  the  year, 

Net  Gain  for  the  Year  ending  Jan.  31,  . . 


$18,000  64 


29 


Amount  paid  in  on  Each  Series, 


Amount  paid  on  Shares  of  the  First  Series, 

$124  00 

i(  <( 

Second 

4 4 

112  00 

14  ii 

Third 

44 

100  00 

<4  44 

Fourth 

4 4 

88  00 

4 4 4 4 

Fifth 

4 4 

64  00 

4 4 4 4 

Sixth 

44 

40  00 

4 4 4 4 

Seventh 

44 

36  00 

4 4 4 4 

Eighth 

4 4 

18  00 

4 4 4 4 

Ninth 

44 

12  00 

Number  of  Shares  in  First 

Series,  . 

15 

“ “ Second 

44 

11 

“ “ Third 

44 

2 

“ “ Fourth 

“ 

40 

“ “ ‘ Fifth 

44 

205 

“ “ Sixth 

44 

, 

88 

“ “ Seventh 

4 4 

212 

“ “ Eighth 

“ 

614 

“ “ Ninth 

4 4 

527 

1,714 

Total  value  of  Stock,  of  all  series,  . . 

$77,723  84 

Add  dues  paid  in  advance  during  the  year. 

• 

• 

• 

• 

167  69 
$77,891  53 

(In  active  Operation)  for  the  Year  ending  January  31,  1869. 


Liabilities . 


Balance  of  Dues  at  last  report, $40,663  26 

Net  gain  on  Stock  at  last  report, 7,107  81 

47,771  07 

Dues  paid  in  during  the  year 22,305  17 


$59,464  70 
492  00 
17,681  54 


70,076  24 

Dues  withdrawn  during  the  year,  10,611  54 

Total  present  balance  of  Dues 

Total  of  Dues  paid  in  advance  . 

Net  Gain  for  the  Year  ending  Jan.  31,  ...  . 


$77,638  24 


30 


Gains. 


Profits  on  Withdrawals, $1,568  32 

Interest  on  Loans, 3,666  00 

Fines, 229  14 

Premiums  on  Loans  . . . 12,537  18 


$18,000  64 


Gain  on  each  Series,  and  Full  Value. 


Gain  in  ten  years  and  four  months,  $76  00  Full  value,  $200  00 


nine  “ “ 64  40 

eight  “ “ 53  58 

seven  “ “ 40  49 

five  “ “ 26  88 

three  “ “ 21  88 

three  “ “ 20  99 

one  year  and  six  months,  13  61 

one  year,  10  31 


176  40 
153  58 
128  49 
90  88 
61  88 
56  99 
31  61 
22  31 


Total  value. 


Profits  not  divided. 


$3,000  00 
1,940  40 
307  16 
5,139  60 
18,630  40 
5,445  44 
12,081  83 
19,408  54 
11,757  37 


Loans, 


77,710  70 
13  05 

$77,723  84 


6 

22 

46 

56 

84^ 

146 

877 


Total  Balance  of  Dues, $59,464  70 

Net  Gain, 17,681  54 

Dues  Unpaid  during  the  year 745  29 


$77,891  63 


31 


Conclusion. 

The  rules  for  governing  a Building  Association,  it  will  readily  be 
perceived,  preserve  strict  equality.  They  are,  in  fact,  perfectly 
democratic ; and  the  benefits  and  results  are  as  hereinbefore  been 
asserted,  entirely  mutual.  There  is  no  separate  class,  and  no  difference 
in  the  advantages  gained  by  one  member  over  those  acquired  by  any  other 
member.  Under  this  system,  the  working  man  becomes  his  own  capitalist, 
combining  the  small  means  of  many  men  into  one  large  sum,  which,  by 
rapid,  profitable,  and  safe  investment,  returns  a gain  that  under  other 
plans  goes  into  the  hands  of  the  capitalist.  It  is  the  principle  of  co-oper- 
ation applied  to  money.  It  is  a people’s  banking-system  ; the  money 
forming  its  capital  is  furnished  by  the  working  man,  who  does  not  want 
the  immediate  use  of  it,  to  the  working  man  who  wants  the  temporary  use 
of  it,  and  is  willing  to  pay  a reasonable  bonus  for  it,  giving  security 
for  its  safe  return.  There  is  no  place  or  occasion  for  the  capitalist  in 
any  part  of  the  system ; for  if  a man  of  large  means  becomes  a mem- 
ber, taking  a large  number  of  shares,  he  can  receive  no  more  profit  on 
each  share  than  the  humblest  member  can.  He  enters  on  an  equal 
footing,  and  remains  so  throughout.  It  is  plain  that  the  scheme  would 
not  work  if  the  stock  were  held  by  a few.  It  requires  a liberal  number 
of  members,  and  the  distribution  of  the  stock  in  small  amounts  among 
them . 

It  has  been  remarked  that  a Building  Association  is  governed  on 
principles  of  strict  equality.  The  stockholders  elect  their  own  officers, 
choosing  from  among  their  numbers  such  as  they  desire  shall  be  the 
managers  of  their  affairs,  from  time  to  time.  The  fourth  section  of 
the  Pensylvania  Act  of  1859  provides  that  “The  numbers,  titles,  func- 
tions, and  compensation  of  the  officers  of  any  corporation  created  by  this 
Act,  their  terms  of  office,  the  time  of  their  elections,  as  well  as  the  qualifi- 
cations of  electors,  and  the  ratio  and  manner  of  voting,  and  the 
periodical  meetings  of  the  said  corporation,  shall  be  determined  by  the 
by-laws.”  Thus  giving  to  the  stockholders  full  control  over  their 
officers,  holding  them  in  complete  check  the  while,  with  the  ability  to 
call  them  to  account  at  any  time.  It  only  remains,  therefore,  for  the 
stockholder  to  exercise  ordinary  care  and  discretion  in  selecting  honest 
and  capable  men,  and  diligence  in  watching  their  management,  to  secure 
one  of  the  safest  and  most  reliable  means  of  investing  his  savings,  as 
well  as  the  quickest  and  most  desirable  way  of  reaching  the  desired 
result. 


32 


The  officers  thus  chosen  conduct  the  affairs  of  the  association  during 
the  year,  and  report  all  their  doings  at  the  annual  meeting  of  stockhold- 
ers, with  the  amount  of  assets  on  hand,  the  profits  and  losses  made 
during  the  year,  the  money  received  from  dues,  interest,  premiums  and 
fines,  and  the  money  paid  out  for  loans,  withdrawals  of  dues,  and  for 
expenses  ; all  of  which  is  carefully  examined  and  verified  by  a commit- 
tee, composed  of  stockholders  who  are  not  officers,  and  reported  to  the 
stockholders’  meeting.  The  officers  of  the  association  who  handle  the 
money, — the  secretary  and  treasurer, — are  required  to  give  security 
for  its  safe  keeping,  in  an  amount  sufficient  to  cover  what  is  likely  to 
be  in  their  hands  at  any  one  time.  Thus,  all  the  parts  of  the  system 
are  held  in  constant  and  complete  chejsk. 

Security  is  Constantly  Increasing. 

Another  evidence  of  the  peculiar  strength  of  the  system,  and  the 
security  of  its  loans,  exists  in  the  fact  that  the  margin  on  its  securities 
— that  is,  the  value  of  the  property  mortgaged,  over  and  above  the 
loan  upon  it — is  constantly  increasing;  for  the  payment  of  dues  is,  in 
effect,  a payment  on  account  of  the  money  borrowed,  and  by  each 
monthly  payment  of  dues  the  amount  of  the  various  loans  is  decreased, 
and  the  value  of  the  securities,  over  and  above  the  loan,  correspondingly 
increased.  So  that  by  this  process  the  association  is  constantly  strength- 
ening itself ; and  what  was  good  security  at  first,  thus  becomes  stronger 
and  better  every  month.  The  expenses  of  carrying  on  the  work  of  a 
Building  Association,  such  as  salaries,  room-rent,  stationery,  and  ad- 
vertising, are  comparatively  light, — perhaps  $400  per  year  would  cover 
all  the  items  of  the  annual  expense  account  of  most  associations.  The 
report  of  one  association  in  Philadelphia,  for  the  year  ending  January 
31,  with  an  issue  of  1,714  shares,  the  total  of  nine  series,  shows 
a net  gain  for  the  year,  of  $17,681.54,  after  deducting  $319.10,  for  the 
year’s  expenses. 

It  will  be  noticed  that  in  the  example  given  in  a former  chapter,  of 
the  manner  of  borrowing  upon  a house  and  lot,  the  greater  part  of 
the  money  with  which  to  pay  for  it,  there  was  mention  made  of  a prior 
estate  or  incumbrance  (a  ground  rent  or  mortgage,  as  the  case  may  be), 
which  takes  pecedence  of  the  mortgage  to  the  Building  Association.  It 
has  been  found  best  for  those  purchasing  a house  through  this  means, 
to  allow  such  prior  incumbrance  to  remain  against  the  property,  for 
this  reason, — if  one  were  to  purchase  a house  at  $2,000,  entirely  clear 
of  all  prior  incumbrances,  to  raise  enough  money  from  the  association 
to  pay  for  it,  it  would  require  a subscription  to  nearly  double  the  number 
of  shares  required  to  purchase  one  with  a small  incumbrance  upon  it, 


33 


entailing  upon  the  borrower  the  payment  of  nearly  double  the  amount 
of  monthly  dues  and  interest ; and  this,  the  ordinary  income  of  a work- 
ing man  would  not  admit  of.  For  instance,  to  purchase  a house  clear 
of  incumbrances  at  $2,000,  supposing  one  had  $350  to  piece  out  the 
price  of  the  house  with,  it  would  require  $1,650  from  the  association  to 
make  the  price  of  the  house  in  full.  Now,  to  obtain  that  sum,  supposing 
we  could  obtain  it  at  twenty-five  per  cent,  premium  otf,  would  require 


him  to  take  eleven  shares,  thus  : — 

11  shares,  at  $200  each, $2,220 

25  per  cent,  premium  off, 550 

Net  amount  received  from  loan, $1,650 

Add  amount  already  in  hand, 350 

Price  of  house, $2,000 

He  would  then  have  to  pay  yearly  as  follows  : — 

Monthly  dues  and  interest,  at  $22  per  month,  for  1 year,  $264 

Yearly  taxes  (about), 40 

Yearly  interest  on  his  own  $350, 21 

Yearly  expenses,  in  place  of  rent, $326 


If  one  is  able,  by  reason  of  a sufficient  income,  to  make  payments  as 
heavy  as  this,  it  would  be  wise  to  purchase  in  this  way,  and  borrow  the 
greater  part  of  the  price  paid  at  once,  for  what  is  paid  to  the  associa- 
tion is  saved,  while  the  interest  paid  on  a prior  incumbrance  is  lost,  as 
it  were,  for  it  goes  the  same  way  that  rent  does,  never  to  make  any 
return ; and  when,  at  last,  the  loan  is  paid  off,  the  house  is  clear,  and 
we  have  the  sum  of  $264  above  the  two  items  of  $40  and  $21  per  year, 
free  to  do  as  we  will  with  it. 

But  one  is  not  always  so  fortunate  as  to  get  his  money  at  25  per  cent., 
but  must  pay  more  for  it ; in  which  case  his  ready  money  must  be  cor- 
respondingly increased  to  an  amount  sufficient  to  make  up  the  differ- 
ence between  what  his  loan  nets  him,  with  the  premium  off,  and  the 
price  of  his  house.  As  was  before  remarked,  this  is  difficult  for  most 
working  men  to  do ; and  even  if  they  could  raise  the  ready  money, 
$325  per  year  is  more  than  most  working  men  are  able  to  pay.  Hence, 
the  slower  and  less  pressing  way  of  taking  a house  subject  to  an  incum- 
brance, and  paying  a smaller  yearly  sum,  is  more  frequently  adopted 
than  the  mode  last  above  mentioned. 

It  is  but  necessary  to  apply  the  changes,  the  foregoing  figures,  as  well 
as  those  scattered  through  the  pages  of  this  book  are  capable  of,  to  the 
circumstances  of  any  individual  desirous  of  enjoying  the  privileges  of 
this  system,— multiplying  them  in  proportion  to  his  means  of  meeting 
5 


34 


the  payments  demanded,  to  enable  any  one  to  tell  how  far  he  can  go,  as 
a borrowing  or  non-borrowing  stockholder  of  a Building  Association. 

He  will  see  how  much  a loan  made  at  a certain  premium  off,  will  net 
him  ; consequently,  how  much  his  cash  thus  obtained  falls  short  of  the 
price  of  the  house  he  wishes  to  purchase,  and  therefore,  how  much  he 
will  have  to  raise  independently  of  the  association ; and  the  number  of 
shares  he  is  required  to  take  to  make  up  the  desired  sum.  This  will 
show  him  what  his  monthly  payments  will  be,  at  $2  per  share ; and  by 
watching  the  average  rate  of  profits  reported  every  year,  he  can  tell 
what  length  of  time  it  will  in  all  probability  take  him  to  pay  off  his  loan, 
if  he  has  one,  or  realize  $200  for  each  share  of  stock  in  cash,  if  he  is 
not  a borrower. 

The  object  of  this  book,  as  its  title  indicates,  is  simply  to  present  in 
a familiar  way  before  the  working  man  and  woman  anxious  for  the  in- 
formation, the  principal  features  of  the  mutual  or  co-operative  system, 
as  applied  to  the  purposes  of  saving,  borrowing,  and  repaying  borrowed 
money,  through  the  medium  of  Building  Associations,  working  under 
the  Pennsylvania  Act  of  1859,  and  to  show  the  peculiar  advantages 
derived  from  its  use  together  wilh  the  reasons  for  them. 

Although  the  system,  as  at  present  carried  out,  is  to  a certain  extent 
defective  in  some  minor  points  and  details,  nothing  more  toward  their 
correction  than  a passing  hint  or  suggestion  is  attempted.  The  explana- 
tion of  the  system  as  at  present  carried  out  in  daily  practice  being  its 
chief  object,  this  book  goes  forth  as  an  informer,  and  not  as  a reformer, 
except  in  so  far  as  the  knowledge  it  imparts  shall  enable  its  readers  to  see, 
upon  a better  understanding  of  the  system,  wherein  the  mischief  lies,  and 
through  this  means  enable  them  to  apply  the  remedy.  “ As  yet,  but  a 
few  persons  of  sound  mathematical  knowledge  or  experience  in  calcula- 
tions have  given  attention  to  the  subject,”  says  a writer  on  the  system 
as  practiced  in  England,  “and  societies  hitherto  formed  (in  England) 
have  been  deprived  of  that  basis  of  science  and  just  reasoning  which 
alone  can  ensure  the  prosperity  of  this  or  any  similar  kind  of  specula- 
tion.” These  remarks  apply  with  equal  force  to  our  American  associa- 
tions, and  it  would  undoubtedly  be  of  lasting  benefit  to  the  system  and 
all  associations  working  under  it,  if  a commission  of  scientific  men, 
competent  in  all  respects  to  perform  the  duty,  were  employed,  under 
the  auspices  of  the  various  associations,  and  at  their  joint  expense,  to 
give  the  system  a thorough  examination  and  study  in  all  its  parts, 
pick  out  such  flaws  as  may  exist  in  present  practice,  and,  as  it  were, 
remodel  the  system,  and  report  upon  a plan  for  universal  adoption, 
containing  all  the  improved  features  that  will  best  harmonize  with  each 
other,  and  work  out  the  best  and  most  equitable  results,  at  the  same 


35 


time  aiming  at  the  greatest  simplicity ; so  that  thereafter  one  associ- 
ation would  be  but  a counterpart  of  another.  A plan  thus  formed, 
composed  of  all  the  best  improvements  on  the  system  would  be  bereft 
of  all  the  various  conflicting  and  confusing  plans  and  so-called  improve- 
ments now  so  prevalent;  and  being  the  recommendation  of  men  of 
known  scientific  attainments,  integrity,  and  social  standing,  it  would 
draw  toward  it  the  respectful  attention  and  confidence  of  all  classes, 
and  build  up  a system  for  universal  adoption  among  the  working 
classes,  that  will  spread  and  extend  far  in  advance  of  the  system  as  at 
present  working,  and  produce  results  that  will  only  cease  with  time 
itself. 


Mr.  Chairman : — 

You  will  have  seen  that  the  interesting  scheme  of  co-operation, 
which  the  work  of  Mr.  Wrigley  has  enabled  me  to  lay  so  fully 
before  your  committee,  gives  the  working  man  the  aid  of  credit 
which  he  now  finds  so  difficult  to  obtain.  It  pays  directly  to  the 
laborer  a part  of  that  surplus  profit  upon  his  production  which 
would  otherwise  swell  the  gains  of  the  capitalist.  And  these 
Building  Associations  are  not  only  unassailable  in  theory,  but 
their  benificence  has  been  practically  proved  again  and  again. 
I have  just  seen  long  streets  of  comfortable  houses  in  Philadelphia, 
that  have  been  built  by  working  men  through  their  agency.  It 
is  quite  time  that  Massachusetts  offered  to  her  industrial  classes 
such  an  opportunity  for  successful  combination.  It  will  be  an 
important  step  towards  the  enlightened  and  perfected  co-operation 
by  which  men  will  one  day  solve  those  social  problems  that  now 
seem  so  perplexing. 


